India Caps Spending by Some Ministries as Virus Hits Revenue
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India Caps Spending by Some Ministries as Virus Hits Revenue

(Bloomberg) -- India imposed caps on spending by some ministries and departments, as the coronavirus outbreak slows economic activity and hurts revenue collection.

“The existing guidelines for expenditure control have been reviewed,” the Finance Ministry said in a memorandum on Wednesday. “Keeping in view the present situation arising out of Covid-19 and the consequential lockdown, it is expected that the cash position of the government may be stressed in April to June.”

Spending by the so-called category ‘C’ ministries including coal, commerce and environment, were capped at 15% of budget estimates for the first quarter of the financial year started April 1. Ministries including home affairs and oil that form part of category ‘B’ would be able to utilize 20% of their available limits during the period. Category ‘A’ ministries that cover health, food and public distribution won’t be affected by the order.

Asia’s third-largest economy is staring at a rare quarterly contraction in gross domestic product in the April-June quarter. A 21-day lockdown of the nation of 1.3 billion people to check the spread of coronavirus has brought activity to a standstill.

The government has already announced a $22.6 billion spending plan as part of measures to ease the economic impact of the pandemic on the poor. It separately eased regulatory rules such as extending deadlines for filing tax returns and waiving penalty on companies for not holding board meetings for a certain period.

A second package to support sectors critically affected by the pandemic is likely as early as next week, people familiar with the matter said.

©2020 Bloomberg L.P.

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